Tag: hindu credit union

Colman Commission – A crucial choice

Image Illustration by NiCam GraphicsThere were several important developments in the Colman Commission last week, with the widely reported appeals of Sir Anthony Colman QC for the Central Bank to change its position with respect to the presentation of accounts to the Enquiry.

From my own attendance at the opening session of the Colman Commission on Friday 11th March and the various reports, it seems that there are various moves afoot to restrict or stop the enquiry.  I expected this sort of scenario in declaring the main players to be part of a ‘Code of Silence’ – it is no surprise to me.

There are three strands which are becoming evident as we move into the new phase, with the Colman Commission and several legal actions swinging into action.

  1. Firstly, we had former HCU boss Harry Harnarine challenging the Colman Commission in Court, claiming it to be illegal etc.  Obviously, Harnarine did not relish the thought of having to answer questions on TV.  The Appeal Court rejected those claims on Monday 4th April and the reports were contradictory, to say the least –

    “Speaking with reporters following the ruling, Harnarine said he was not satisfied with the panel’s ruling.
    Harnarine said he welcomed the enquiry and would make objections “at the right time”.
    Harnarine wanted the court to declare the commission null and void, that it was an abuse of the court’s process and that it was unlawful and illegal, among other requests.”

  2. Secondly, the Central Bank’s action to wind-up Clico Investment Bank (CIB) was challenged by the National Gas Corporation (NGC) and the National Insurance Board (NIB).  On 27th January the judge in that case ruled that the petitioner must be questioned.  The Central Bank’s attorneys had fought very hard to resist that.  The petitioner was the Inspector of Financial Institutions, Carl Hiralal.  I have already questioned the apparent anomalies in his affidavits – in ‘The House on the Corner’ parts 1 & 2 – so Hiralal’s cross-examination was one to be anticipated.  On 28th March, NGC withdrew from that lawsuit, which was to recover some $1.1Bn from CIB.  There has been no statement as to why that was done.  Given that the missing $1.1Bn is our taxpayers’ money, an urgent statement to clarify this decision is needed.
    WHERE IS THE NGC’s MISSING $1.1Bn?
    The NIB’s lawsuit is still ongoing and I await that cross-examination of Hiralal with great interest.
  3. Thirdly, we now have reports of various objections being raised by the attorneys in respect of the accounts for CL Financial.

Readers need to be clear that there are three types of accounts in this matter.  Given the room for error it is important to get this straight:

  1. Annual Audited Accounts – These are routine and ought to have been filed by now.  The last accounts for the CL Financial Group and its subsidiaries were by PriceWaterhouseCoopers (PWC) as at year-end 2007.  We therefore have a situation in this country with two insurance companies – CLICO and British-American – open for business with no accounts filed for 2008, 2009 or 2010.  That is unacceptable and further delaying will only bring discredit to the responsible parties.  The sidebar contains more on this.
  2. The Reviews of Accounts – Post-bailout, the Central Bank has hired Ernst & Young (E&Y) to review the accounts of the Clico Investment Bank and CLICO.  In addition, the Commissioner of Co-operatives had hired E&Y to do the same for Hindu Credit Union (HCU).  From what I have read, E&Y seem to be objecting to both the production of those reports to the Colman Commission and the subpoena to its Executive Chairman, Colin Soo Ping Chow – see Trinidad Express   of 6th April – see here.  I am not at all clear what is the objection to releasing those reports, after all, the E&Y report into CIB formed part of the Central Bank submissions to the High Court in the winding-up petition.
  3. Forensic Audits – These were reportedly done by Bob Lindquist and KPMG Canada for the Central Bank on CLICO, with the latter firm now claiming that their client is objecting to disclosure.  The grounds appear to be that if those reports were disclosed, it would undermine the intended prosecutions.  That seems to me to be a reasonable rationale to pause the publication of those reports until that impasse is resolved.

So, what is at stake here?

Sad to say, but this is reminding me of the actions of Calder Hart/UDeCOTT in trying to derail and frustrate the Uff Enquiry.  On that infamous occasion we had the spectacle of a State-owned company challenging the Uff Commission – which had been established by the State – in the High Court.  I hope that my view is incorrect.

This led to Colman’s appeal to the public as reported in the Trinidad and Tobago Guardian on 7th April and Trinidad Express of Friday 8th April.  The first of those reports contained an intriguing fragment in which former AG and Law Association President, Russell Martineau SC raised objections on behalf of his clients, PWC, on grounds of confidentiality. That mystified me, since PWC’s audits seem to be confined to the first, most innocuous group, as outlined above.

According to Colman, if the Commission has to get fresh reports into these matters it will mean more delays and more expense.  He said that would be a matter for the public to decide if that is in their interest, hence these efforts.

The Central Bank made a press release on 14th April which confirmed that they intend to take legal actions. Please note that the press release was silent as to the Annual Audited Accounts. For whatever reason, the Central Bank is continuing its silence as to the status of the most innocuous class of accounts.

It is unacceptable for these issues to be mixed in this misleading fashion. Simple and inescapable questions need to be answered now –

  • Are the CL Financial annual audited accounts for 2008, 2009 and 2010 ready?
  • If yes, why have they not been published?
  • If not, why not?
  • What is the objection to publishing the Reviews of Accounts?

It seems that we are being given a tough choice, between –

  1. a solid investigation, which preserves the secrecy of the forensic reports, with probable prosecutions, or
  2. a wide-open investigation, with a high level of information emerging about the entire fiasco, but little chance of successful prosecutions.

The Trinidad and Tobago Guardian editorial of Tuesday 12th opted for the former, while the Trinidad Express editorial of the same day took the opposite view, favouring the latter.

The decisive question, for me, is whether the Central Bank has a track record upon which we can rely. The basis of their objections is the notion that prosecutions are to be mounted against the offending parties. Can we really accept that?

The Central Bank’s track-record on these matters has been doubtful and people are right to be concerned.  From the CIB’s reported failure to file Corporation Tax returns for 2007, 2008 and 2009 to the continued inaction on the ‘Fit and Proper’ regulations, to the failure to recover the dividends CLF paid after the bailout was requested. A poor record of proper enforcement.

We are now being asked to believe that an organisation which is unable or unwilling to pick those ‘low-hanging fruit’, will be able and willing to prosecute ‘high-flying smartmen’.

I am being reminded of those childish spelling-games we all played –

A for Apple
B for Bat
C for yuhself!

Trinidad & Tobago Transparency Institute made a press release on the issue, which called on the Central Bank to act in an exemplary fashion. That is a welcome statement.

My vote, for what it is worth, is that we should preserve the secrecy of the forensic reports so as to remove any escape hatch for these fraudsters and their accomplices. Leave them no avenue to claim that if this or that had not happened they would have been able to prosecute. There is probably enough material in the other two classes of accounts to progress the Colman Commission.

SIDEBAR

Freedom of Information – Having had three applications under the FoI Act ignored, I have now given the Ministry of Finance ten (10) days to provide a copy of CL Financial’s letter of 13th January 2009 requesting the bailout and the 2008 Audited Accounts for the CLF group – see here .  If those documents are not supplied, it is off to Court we go.

Legal Opinions – At this point in the mix, we sorely need to hear from the legal columnists as to what is the position in this heated contest – Martin Daly, Dana Seetahal, Ken Lalla and Martin George, we await.

CL Financial bailout – Sunlight Disinfectant

If you think this title is for the latest brand of household cleaner, you would be wrong.  I drew that title from the famous statement by deceased US Supreme Court Justice Louis Brandeis, in reference to corruption and fraudulent dealings: ‘sunlight is said to be the best of disinfectants.‘

Of course, this is all about the impending Colman Commission of Enquiry into the failure of CL Financial and other companies (including CMMB) and the Hindu Credit Union.

We are attempting to understand our situation in this financial fiasco – how was the entire collapse caused?  Who is responsible?  What can we do to avoid a repetition?

Our House needs a serious cleaning and we need a new commitment to serious retrospection if we are to succeed in understanding this scandalous situation.

To set the stage, there are four principalities being represented in this Enquiry –

  1. CL Financial Chiefs – The people who had Direction and Control of the entire failed group – that would include the shareholders.
  2. The Regulators – The Supervisor of Insurance, Securities and Exchange Commission (SEC) and the Central Bank.
  3. The Auditors – PriceWaterhouseCoopers and Ernst & Young – the former being auditors for the CL Financial group and the latter acting for the Central Bank.
  4. The aggrieved Policy-Holders and Depositors – Several groups have been formed to seek the return of all the monies owed to these investors.

My first point about this Colman Commission is how welcome it is, as a tangible sign of a change in how our country is being run.  No, I did not vote for either group in the last election, but it seems to me that neither of the last two regimes (Manning or Panday) would have initiated a public enquiry into this financial fiasco.

As much as I approve the decision to have this public enquiry, the purpose of this article is to warn against some of the forces now being assembled to erode the enquiry’s effectiveness.  Even though, in this respect, political times have changed, we need to remain vigilant if the Colman Commission is to be effective.

To be sure, the four principalities I listed comprise very powerful players for whom this enquiry is a literal nightmare, since they will be obliged to explain some of their biggest decisions and actions, which they would never have had to explain to anyone outside of their own circle.

If the Enquiry takes place as intended, we are going to be afforded an unprecedented insight into the workings, dealings, arrangements and situations in our leadership class – all of it at a depth and range never before recorded.  Matters that had been only the subject of picong, ole talk and so-called urban legends will all now become part of the official record.  Yes, our Republic will be coming of age.

Our country is a Republic, which to me means that no class of citizen ought to enjoy rights which are superior.  But there has been a pattern of behaviour in this fiasco which has been very disturbing because it violates those Republican expectations.  Of course, I am referring to the fact that a three-tier system seems to have been in operation during the entire meltdown.

  1. The lowest tier comprises those many persons who are now fretting over their investments with this failed group.  Those people have to decide between continued protest action, legal action or just plain pleading to get some relief.  A significant number of them would have placed undue reliance on the CLF products and would be suffering extra stress because they put too many, or all, of their eggs in one basket.
  2. The middle tier is the lucky and/or well-connected people who were able to get back their money after the group collapsed.  When the Prime Minister announced this Enquiry on 1st October 2010, she promised to release details of who received the monies disbursed in that period – i.e. after 30th January 2009.  That list of names and who received what sums would be an absolutely explosive one.
  3. Of course, the top tier and the absolute insiders would be those who had early warning of the oncoming collapse and took steps to preserve their wealth.  That group would have to include the top CL Financial chiefs who left in the 12 months before the collapse – Monteil, Fifi and Mayers.  Major depositors and investors would also have been part of this privileged group.  The Governor of the Central Bank and the last Minister of Finance also withdrew monies just before the collapse.

Maybe I am entirely wrong and there was complete surprise when the CL Financial group collapsed.  But if that is the case, one is really contemplating a slack system of management systems and an entire swath of our ruling elite who are not ‘fit and proper’.  The question of who knew what and when, will be a main point of dispute, because either way you slice it, the picture is unappealing.

You can be sure that the people in the top layer will do anything in their power to protect themselves from the stern scrutiny of those in the lowest group, not to mention the public, who are paying for all this.

I wrote a previous column in this series, entitled ‘Taking in front‘ and on this occasion, in light of what is at stake, I, too, am taking in front.  Having suffered a defeat in that the Colman Commission has now been established, the members of the Code of Silence can be expected to try halting, delaying or just diluting the Commission.

Harry Harnarine, former HCU president. Photo © newsday.co.tt
Harry Harnarine, former HCU president. Photo © newsday.co.tt

We have already had former Hindu Credit Union (HCU) chief, Harry Harnarine, defeated in the High Court in an attempt to stop the Colman Commission.  I was not surprised to read reports that Harnarine is planning to appeal that decision.  We can expect other strong challenges as this historic process unfolds.

If the members of the Code of Silence are unable to derail the Commission itself, we should not be surprised if they try to cloak the proceedings in some kind of blanket to prevent too much information escaping.

Readers, please note that the process of asking the Court to prevent publication of a particular piece of evidence is a very swift one, with the ruling expected in the very same sitting.  That is because if those proceedings are too drawn-out, it can be actually self-defeating, since the matter which they are seeking to have concealed can be published and discussed while a decision is awaited.

That is the reason we need to beat this drum now.  We cannot wait for the filing of injunctions and then seek to publish.  By then, it would be too late.

The new algebra is simple and inescapable –

Expenditure of Public Money – Transparency = CORRUPTION

Whatever the negatives of the American Imperium, there are still aspects of that society which are worthy of emulation.  The example which comes to mind is the recently-published report of the Financial Crisis Inquiry Commission.

The preface of that Report contains an instructive paragraph, at page xii –

“…This report is not the sole repository of what the panel found. A website — www.fcic.gov — will host a wealth of information beyond what could be presented here. It will contain a stockpile of materials — including documents and emails, video of the Commission’s public hearings, testimony, and supporting research — that can be studied for years to come. Much of what is footnoted in this report can be found on the website. In addition, more materials that cannot be released yet for various reasons will eventually be made public through the National Archives and Records Administration…”

The US legislature is determined that the inner lessons and testimony on this important crisis are available to all interested parties for the years ahead.  That represents a solid commitment to a learning society, which will at least attempt to draw lessons from the bitterest of experiences.  In my opinion, that commitment is worthy of emulation.

Has our society reached the stage of maturation to commit to an entirely transparent process of retrospection?  That is the question which will be tested in the weeks and months to follow.

The entire proceedings of the Colman Commission must be held in public.  The proceedings must be on TV and available on the internet.  The Colman Commission needs a strong internet presence, with its own website.

Sunlight Disinfectant cleans brighter, you see?